AUDITOR'S REPO RTdocuments.worldbank.org/curated/en/...Ulaanbaatar city, Sukhboatar district, Baga...

AUDITOR'S REPO RTMongolia Improved Governance of Extractives Project

Financial statements as of December 31, 2018

Ulaanbaatar 2019

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"NIISLEL AUDIT" LLCCertified audit, appraisal and accounting consultancy company

Date: . .

INDEPENDENT AUDITOR'S REPORT

To: PIU Coordinator Sh.TsolmonMongolia Improved Governance of Extractives ProjectGrant No: TFOA2830

We have audited the Project Financial Statements comprising the Balance Sheet, Project Sourcesand Uses of Funds by project activity, Disbursement Report and the Designated AccountStatement of the Mongolia Improved Governance of Extractives Project Grant No: TFOA2830for the period ended December 31, 2018. The management of Mongolia Improved Governanceof Extractives Project is to prepare the Project Financial Statements on the cash receipts andpayments basis in conformity with International Public Sector Accounting Standards (IPSAS).On this basis, cash receipts are recognized when received and cash expenditures are recognizedwhen paid rather than when incurred. Our responsibility is to express an opinion thereon basedon our audit.

We conducted our audit in accordance with International Standards on Auditing issued by theInternational Auditing and Assurance Standards Board of the International Federation ofAccountants. These standards require that we plan and perform the audit to obtain reasonableassurance about whether the interim financial reports are free of material misstatement. An auditincludes examining on test basis, evidence supporting the amounts and disclosures in the interimfinancial reports. An audit also includes assessing the accounting principles used and significantestimates made by management as well as evaluating the overall statement presentation. Webelieve our audit provides a reasonable basis for our opinion.

In our opinion, the Project Financial Statements have been prepared in accordance with theInternational Public Sector Accounting Standard issued by the Public Sector Committee of theFederation of Accountants, presented fairly the cash receipts and payments of the project for theperiod ended December 31, 2018 and furthermore in all material respected, expenditure haveapplied to the purpose intended in the Grant Agreement, Grant No: TF0A2830

"us -A it" LLC

Ulaanbaatar city, Sukhboatar district, Baga toiruu-44 Phone/Fax: 31-89-18, 20095IISLEL-AUDIT Co,LtdE-mail: info@nislelaudit. mn CERTIFED ACCOUNTING

AUDIT t APPPA:-AL

The Government of MongoliaThe International Development Association

Crant No: TF0A2830Mongolia Improved Governance of Extractives Project

BALANCE SHEETFor the period from Dec 31, 2017 to Dec 31, 2018

(in USD)

Balance category Notes Dec 31, 2018 Dec 31, 2017

ASSETS:

Cash and cash equivalents 28,848.45 12,081.55Designated account 4.1 27,546.79 10,450.16Sub-Account 4.1 1,301.66 1,631.39Cumulative Project Expenditures 423,000.73 219,357.38Goods 4.2 (a) 2,930.88 2,102.20Consulting services 4.2 (b) 274,777.00 160,292.46Non consulting services 4.2 (c) 48,702.22 2,335.71Training and Workshop 4.2 (d) 42,113.76 26,546.43Incremental Operating Costs 4.2 (e) 54,476.87 28,080.58

TOTAL ASSETS 451,849.18 231,438.93

FUNDS:

IDA's fund 4.2 450,000.00 230,067.73Interest Earned 4.2 (f) 1,849.18 1,371.20

TOTAL FUNDS 451,849.18 231,438.93

Prepared by, Approved by:

A.OTGONT NGALAG SH.TSOLMONFinancial Officer Project Coordinator

cd

"NIISLEL AUDIT" LLCCertified audit appraisal and accounting consultancy company

Date: M . z/g


To: PIU Coordinator Sh.Tsolmon

Mongolia Improved Governance of Extractives ProjectCrant No: TF0A2830

We have audited the accompanying Statement of Sources and Uses of Funds of the MongoliaImproved Governance of Extractives Project submitted to the World Bank for the period endedDecember 31, 2018 in support of credit withdrawals under the Grant Agreement, Grant No:TF0A2830.

We conducted our audit in accordance with generally accepted auditing standards thataccordingly included examination, on a test basis, of evidence supporting the amounts anddisclosures in the Statement of Sources and Uses of Funds. An audit also includes assessing theaccounting principles used and significant estimates made by management as well as evaluatingthe overall statement presentation. We believe our audit provides a reasonable basis for ouropinion.

In our opinion, the Statement of Sources and Uses of Funds submitted together with the internalcontrols and procedures involved in their preparation can be relied upon to support theapplication for credit withdrawals.

"Niislel-Audit" LLC

Ulaanbaatar city, Sukhbaatardistrict,8 aga toiruu-44 Phone/Fax: 31-89-18, 70120095 - LE-mail: [email protected] R C 3


Mongolia Improved Governance of Extractives ProjectCrant No: TFOA2830

PROJECT SOURCES AND USES FUNDSFor the period from Dec 31, 2017 to Dec 31, 2018

(in USD)

Sources and Uses Funds Notes Cumulative to 2018 Dec 31, 2017Dec 31, 2018

SOURCES OF FUNDS:

IDA's fund 4.2 450,00000 219,932,27 230,06773Interest earned 4.2 (f) 1,849,18 47798 1,371,20

TOTAL SOURCES OF FUNDS 451,849.18 220,410.25 231,438.93

USES OF FUNDS:

Goods 4.2 (a) 2,93088 82868 2,102,20Consulting services 4.2 (b) 274,777-00 114,48454 160,292,46Non consulting services 4.2 (c) 48,702.22 46,36651 2,335,71Training and Workshop 4.2 (d) 42,113,76 15,567.33 26,546.43Incremantal Operating Costs 4.2 (e) 54,476.87 26,396,29 28,080.58

TOTAL SOURCES OF FUNDS 423,000.73 203,643.35 219,357.38

SURPLUS OF FUNDS OVER USES 28,848.45 16,766.90 12,081.55

Prepared by: Approved by:

A.OTGONTU GALAG SH.TSOLMONFinancial fficer Project Coordinator

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Date: .-Wq


To. PYU Coordinator Sh.Tsolmon


We have audited the accompanying the Statement of Expenditures (SOEs) of MongoliaImproved Governance of Extractives Project submitted to the World Bank for the year endedDecember 31, 2018 in support of credit withdrawals under the Grant Agreement, Grant No-TFOA2830.

We conducted our audit in accordance with generally accepted auditing standards that includedexamination, on a test basis, of evidence supporting the amounts and disclosures in the Statementof Expenditures. An audit also includes assessing the accounting principles used and significantestimates made by management as well as evaluating the overall statement presentation. Webelieve our audit provides a reasonable basis for our opinion.

In our opinion, the Statement of Expenditures submitted together with the internal controls andprocedures involved in their preparation can be relied upon to support the application for creditwithdrawals,

"Niislel-Audit" LLC

'_LtdUlaanbaatar city, Sukhbaatar district, Baga toirvu-44 PhonelFax, 31-89-18, i,0120096-

E-mail., info@ndslelauditmn CfFFZT



STATEMENT OF EXPENDITURES (IDA Withdrawals)For the period from Dec 31, 2017 to Dec 31, 2018

WA Application Claimed Credited Amount Amount credited Differencenumbers type date date claimed in USD in USD

Beginning balance 230,067.73 230,067.73 -

WA-7 Replenishment 2018.01.19 2018.0122 39,289.65 39,289.65 -

WA-8 Replenishment 2018.04.30 2018.05.01 29,698.90 29,698.90 -



WA-11 Replenishment 2018,08.21 2018.08.22 39.327.35 39,327.35 -



Sub-total amount 219,932.27 219,932.27 -Total 450,000.00 450,000.00 -

Prepared b Approved by:

A.OTGONTJ GALAG SH.TSOLMONFinancial officer Project Coordinator

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_Aft "-a k,., "NIISLEL AUDIT" LLCCertified audit, appraisal and accounting consultancy company

Date: .-49Y.10" . -0/9 -


To: PIU Coordinator Sh.TsolmonMongolia Improved Governance of Extractives Project

Crant No: TFOA2830

We have audited the accompanying Designated Account Statement of the Mongolia Improved

Governance of Extractives Project submitted to the World Bank for the year ended December 3 1.2018 in support of credit withdrawals under the Grant Agreement, Grant No: TFOA2830.

We conducted our audit in accordance with generally accepted auditing standards that includedexamination, on a test basis, of evidence supporting the amounts and disclosures in theDesignated Account Statement. An audit also includes assessing the accounting principles usedand significant estimates made by management as well as evaluating the overall statement

presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion, the Designated Account Statement submitted together with the internal controlsand procedures involved in their preparation can be relied upon to support the application forcredit withdrawals.

"NiislerAukit" LLC

LfdUlaanbaatar city, Sukhbaatar district, Baga toiruu-44 PhonelFax. 31-89-18, 70120095 1 q IE-mail, [email protected] E R-



DISIGNATED ACCOUNT STATEMENTFor the period from Dec 31, 2017 to Dec 31, 2018

(in USD)

Notes Dec 31, 2018 Dec 31, 2017

PART A - Account transactions

Beginning balance .Add 451,849.18 231,438.93

IDA Advance 4.2 50,00000 50,000.00Replenishment 4.2 400,000.00 180,067.73Interest Earned 4.2 (f) 1,84918 1,371,20

Deduct 423,000.73 219,357.38Goods 4.2 2,930.88 2,102.20Consulting services 4.2 274,777.00 160,292.46Non consulting services 4.2 48,702.22 2,335,71Training and Workshop 4.2 42,113.76 26,546,43Incremantal Operating Costs 4.2 (e) 54,476.87 28,080.58

Total deductions 28,848.45 12,081.55

PART B - Account reconciliations

Amount advanced by the IDA 4.2 50,000.00 50,000.00Ending balance 4.1 27,546.79 10,450.16Add 24,302.39 40,921.04

Sub-accounts (USD and MNT) ending balance 4.1 1,301.66 1,631.39Amount withdrawn but not claimed yet 23,000.73 39,289.65Claimed in previous WA not yet credited -

Deduct 1,849.18 1,371.20Interest earned 4.2 (f) 1,849.18 1,371.20

Total advance to Designated account for 50,000.00 50,000.00

Prepared by: Approved by:

A.OTGONT NGALAG SH.TSOLMONFinancial Officer Project Coordinator


Date: .


To: PIU Coordinator Sh.Tsolmon

Mongolia Improved Governance of Extractives ProjectCrant No: TF0A2830

We have audited the accompanying Sub Accounts Statement of the Mongolia ImprovedGovernance of Extractives Project submitted to the World Bank for the period ended December31, 2018 in support of credit withdrawals under the Grant Agreement, Grant No: TF0A2830.

We conducted our audit in accordance with generally accepted auditing standards that includedexamination, on a test basis, of evidence supporting the amounts and disclosures in the SubAccounts Statement. An audit also includes assessing the accounting principles used andsignificant estimates made by management as well as evaluating the overall statementpresentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion, the Sub Accounts Statement submitted together with the internal controls andprocedures involved in their preparation can be relied upon to support the application for creditwithdrawals.

"Niislel-Audit" LLC

Ulaanbaatar city, Sukhbaatar district, Baga toiruu-44 Phone/Fax: 31-89-18, 70120095 L -E-mail: [email protected]



SUB ACCOUNTS STATEMENTFor the period from Dce 31, 2017 to December 31, 2018

(in USD)

Dec 31, 2018 Dec 31, 2017

Opening balance 1,631.39 -Balance of Operational account -

AddAdvance from Designated account 315,727.59 176,932.46

Other

Net interest earnings 456.75 453.61Total additions 316,184.34 177,386.07

Deduct 316,514.07 175,754.60Goods 267.58 177.96Consulting services 225,263.16 122,613.47Non Consulting services - -Training and Workshop 36,636.39 24,942.67Operating costs 54,346.94 28,020.50Transferred to petty cash -Uses of interest earningExchange rate (loss or gain) -

Total deductions 316,514.07 175,754.60Closing balance - -

Balance of Operational account 1,301.66 1,631.39

Balance of Treasury Account 1,301.66 1,631.39

Prepared by: by'

A.OTGONTUGALAG SH.TSOLMONFinancial officer Project Coordinator

The Government of MongoliaInternational Development Association

Grant Nb: TF0A2830Mongolia Improved Governance of Extractives Project (MIGEP)

NOTES TO THE FINANCIAL STATEMENTS

As of December 31, 2018. PROJECT BACKGROUND

The grant agreement (TF0A2830) to implement the project in 2016-2018 was establishedbetween the Government of Mongolia and International Development Association on July 6 h 2016.The grant amount is 450,000 USD and project completion date is December 31 , 2018.

The objective of the project is to enhance transparency and accountability in the management ofMongolia's extractives sector through an inclusive and sustainable EITI process. The project consistsof the following parts:

Component #1: Building stakeholders capacity to engage through training and conferences

(i) capacity building of stakeholders in the EITI process; (ii) training; (iii) sub-national conferencesin four regions; (iv) training and awareness raising workshops for civil society members andcormnunity leaders on the EITI; and (v) support for dissemination and awareness campaigns,including television campaign, articles and interviews through daily newspapers, websites and radiochannels, and printing of EIT1 reports and other promotional materials.

Component #2: Strengthening Mongolia ELTI Secretariat's communication and knowledge basethrough the provision of a study tour for the Mongolia EITI; and training and promotion of the EITI.

Component #3: EITI Secretariat operational needs.

Provision of support to the Mongolia EITI Secretariat for purposes of carrying out of the day-to-dayProject activities including financial management, procurement, environmental and socialmanagement, communication and monitoring and evaluation of Project activities.

Component #4: Capacity building support for local EITI sub-councils' members and otherstakeholders through training, including EITI soum level roadshows for local conununity and otherstakeholders.

Eligible expenditures shall be financed out of the grant proceeds and allocated financing andpercentages of each expenditure category are shown in the table below:

Category Amount allocated Percentage of expenditures(in USD) (including tax)

Goods, Non-Consulting Services,Consultants Services, Training, Workshop 450,000 100%and Incremental Operating Costs

TOTAL AMOUNT 450,000 100%

C-ERT:.Li.J 2I

MIGEP Secretariat was established and headed by the Prime Minister of Mongolia. MIGEPsecretariat and national council provide strategic and policy guidance to the project management unit(PMU). The PMU within the Cabinet Secretariat is responsible for the project implementation,financial management, monitoring, and reporting. The PMU consists of Project coordinator,Financial management specialist, IT specialist, and comnunications specialist.

2. SUMMARY OF SIGNIFICANT POLICIES

Financial report consists of following reports:

1. Balance sheet2. Statement of funding source and expenditures

I Financial reporting 3. Statement of expenditures4. Statement of expenditures (detailed)5. Statement of designated account6& Statement of operational account

Project Management Unit reports its source of funding and expendituresunder cash based accounting method in accordance with International PublicSector Accounting Standards (IPSAS) issued by the International Federation

2 Basis of presentation of Accountants (TFAC).

The Project Implementation Manual includes financial management section.The section contains detailed guidelines approved by the World bank onproject accounting and preparation of financial reporting

. RThe currency used for project reporting is USD. MNT incurred costs shall beconverted to USD at rate set by the Bank of Mongolia

The account balances and transactions of the financial statements betweenJanuary 1R, 2018 and December 3P, 2018 were audited-

5 Accounting- software "Microsoft excel" software were used to keep financial records and preparefinancial reports.

6 Income Income is recognized when cash is received. Income consists of the fundingtransferred by the World Bank and bank account interest earning.

Disbursement is recognized when paid rather than at the time expenses7 Expenditureinurdincurred.

A. Designated account

In accordance with the Disbursement Letter of the Grant No. TFOA2830, theProject shall maintain one segregated USD account at a commercial bank

acceptable to the Bank with the ceiling lirmit of USD 50,000Bank account and pettycash B. Operating account

As specified in the Disbursement Letter, the Project shall maintain OperatingAccount (OA) in MNT with ceiling equivalent to USD 20,000. The OA shallbe used to pay eligible expenditures of training and incremental operatingcosts with approval of the Project coordinator. Based on annual approved

CELR-

budget the PMU replenishes the OA quarterly-

The Ministry of Finance directed projects funded by the internationalorganizations to use Government treasury system. In compliance with thisdecision, the operating account balance at the State bank was transferred tothe State Treasury Account on December 15th, 2017.

C. Petty cash

Limited amount of cash withdrawn from the OA and kept as petty cash forimmediate payments. Petty cash should not exceed MvfLNT 500,000 and use ofpetty cash is subject to Project coordinator's approval. In some cases, pettycash was used to pay per diem, transportation and accommodation cost oflocal missions.

The Guidelines for Procurement of the World Bank shall be followed forprocuring goods, works and services. Following methods should be used forGoods:

1. International Competitive Bidding >=USD 1,000,0002. National Competitive Bidding <USD 1,000,000

Procurement of goods, 3 Shopping <USD 100,000works and services 4. Direct Contracting-all contracts regardless of contract value

Following methods should be used for Works:

L International Competitive Bidding >=USD 5,000,0002. National Competitive Bidding <USD 5,000,0003. Shopping <USD 200,0004. Direct Contracting-all contracts regardless of contract value

The Guidelines for Procurement of the World Bank shall be followed forprocuring consulting services, The following methods, other than Quality-and Cost-based Selection, may be used for the procurement of consultants'services for those assignments which are specified in the Procurement Plan:

10 Procurement ofconsulting services (A) Quality-based Selection;

(B) Selection based on Consultants' Qualifications;(C) Single-source Selection of consulting firms;(D) Selection of Individual Consultants; and(E) Single-source procedures for the Selection of Individual Consultants.

11 Monitoring organization The World Bank and the Cabinet Secretariat

i-,Ltc

3. DISBURSEMENT PROGRESS BY COMPONENTS

As of December 31I, 2018, the PMIU had received USD 450,000 (100%) through the designatedaccount and actual disbursement is USD 423,000.73 (94%).

Total scheduled budget and disbursement of the Project, as of December 31', 2018:

(in USD)Category Amount allocated Cumulative Disbursement

disbursement percentage

Training costs for the Component #1 of 50,058.43 34,733.40 69%the Project

Non-Consulting Services and 68,48434 65,297,06 95%Consultants Services, and IncrementalOperating Costs for the Component #2 ofthe Project

Goods, Non-Consulting Services, 322,357.83 313,887.26 97%Consultants Services, and IncrementalOperating Costs for the Component #3 ofthe Project

Consultants Services Costs for the 9,099.40 9,083.01 99.80%Component #4

TOTAL AMOUNT 450,000.00 423,000.73 94%

4. ITEMS IN THE FINANCIAL STATEMENT4.1. Cash and cash equivalent

The PMU maintains a designated account in USD and an operating account in MNT at the StateTreasury as agreed with the World Bank.

(in USD)

2017.12.31 2018.12.31

Petty cash /MNT/ 161.48 -

At the commercial bank and State Treasury: 11,920,07 28,848.45

Designated account at the State bank /USD/ 10,450.16 27,546.79

Operating account at the State Treasury /IMNT/ 1,469.91 1,301.66

TOTAL AMOUNT 12,081.55 28,848.45

4.2. Disbursement by category

Cumulative disbursement of the Project by expenditure category:(in USD)

Expenditure category Budget Up to Dec In 2018 Dec 31 Dirbursement31 2017 2018 percentage

Goods 5,000.00 2,102,20 828.68 2,93088 58.60%

Consultants Services 292,000.00 160,29246 114,48454 274,777.00 9410%

Non-Consulting Services 50,000,00 2,33571 46,36651 48,702.22 97-40%

Training, advertisement 45,00000 26,546,43 15,567.33 42,113.76 93,59%

Incremental Operating Costs 58,000,00 28,080.58 26,396.29 54,476.87 94,00%

TOTAL AMOUNT 450,000.00 219,357.38 203,643.35 423,000.73 94.00%

(a) Goods

Disbursement as of December 31", 2018:

(in USD)

Expenditure Dec 31s' 2017 2018 Dec 31 2018

Office fumiture and equipment 2,102.20 828.68 2,930.88

Total amount 2,102.20 828.68 2,930.88

(b) Consultants Services:

Disbursement as of December 3 1", 2018 by components:

(in USD)

Expenditure Dec 3P' 2017 2018 Dec 31 2018

Component #2

Consultants Services 2,374.80 - 2,374.80

Component #3

Consultants Services 157,917.66 105,401.53 263,319.19

Component #4

Consultants Services - 9,083.01 9,083.01

Total amount 160,292.46 114,484.54 274,777.00

(c) Non-Consulting Services:

Disbursement as of December 3 1 st, 2018 by components:

(in USD)

Expenditure Dec 31'" 2017 2018 Dec 31t 2018

EITI video - 37,659.90 37,659.90

EITI report and publication printing 2,335.71 8,70661 11,042,32

Total amount 2,335.71 46,366.51 48,702.22

(d) Training, advertisement:

Disbursement as of December 31", 2018 by components:

(in USD)

Expenditure Dec 31 2017 2018 Dec 31'" 2018

Component #1

Training 24,140,05 10,593,35 34,733.40

Component #2

Training 2,406.37 4,973,99 7,38036

Total amount 26,546.43 15,567.33 42,113.76

(e) Incremental Operating Costs:

Disbursement as of December 31", 2018 by components:

(in USD)

Expenditure Dec 31 2017 2018 Dec 31'" 2018

Component #2

Advertisement on daily newspapers 2,524.16 4,315.52 6,839.68

Component #3

Incremental Operating Costs 25,556.42 22,080.77 47,637.19

Total amount 28,080.58 26,396.29 54,476.87

(f) Interest income:

Disbursement as of December 31V, 2018:(in USD)

Bank name Account name Account number Dec 3 1 t 2017 Dec 3 P12018

State bank (USD) Designated account 1049000526 917.59 1,392.43

State bank (MNT) Operating account 1049000518 453.61 45675

Total amount 1,371.20 1,849.18

5. PROCUREMENT

In the reporting period, procurements goods in the amount of USD 2,930,88 (0,7% of totaldisbursement), non-consulting services in the amount of USD 48,702.22 (11.5% of totaldisbursement) and consultants services in the amount of USD 274,777 (64.9% of total disbursement)were carried out respectively. The PJMU used appropriate procurement methods in compliance withthe related guidelines of the World Bank and the Government of Mongolia for each procurement.

6. PROJECT IMPLEMENTATION OUTCOME

MIGEP was implemented from August 2016 through end of 2018. As a result of the projectimplementation, the Mongolia was recognized as 2nd nation which passed the EITI standards andinternational independent auditors rated that Mongolia has met 27 out of 28 required measurement ofEIT1. Throughout the project implementation, over 30 trainings for state owned mining companies,state officials, civil society organizations, and broadcasters, 6 public discussion workshops, 8 opendoor meetings in rural areas, and 2 study tours were organized respectively. Consequently, theseactivities increased knowledge and understanding of local citizens on extractive industry from 15%to 60% and made information of mining companies related to resources used in their operations,created waste and rehabilitation of environment to be transparent. USD 423,000 or 94% of total grantamount (USD 450,000) was fully utilized. Annual financial reports have been submitted to the WorldBank, the Ministry of Finance, and the Cabinet Secretariat.

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